Revisiting openness-growth nexus: Panel data estimates for selected developing Asian countries

Abstract

Trade openness is viewed as a way for Asian countries to progress economically and socially. Therefore, determining how trade affects economic growth is crucial for society, particularly for emerging economies. This paper provides empirical evidence on the issue of how openness to trade affects economic growth. A sample of 22 selected Asian countries has been taken as a balanced panel. To carry out the analysis, Auto Regressive Distributive Lag Model (ARDL) on annual data from 1990 to 2020 is used. To select between Pooled Mean Group (PMG) Mean Group (MG) and Dynamic Fixed Effect (DFE) estimators of ARDL, the Hausman test is used. PMG turns out as a better estimator. PMG estimation confirms that trade openness and economic growth exhibit a positive and statistically significant relation in the long run, however, short-run results lack significance. The study concluded with the recommendation that policymakers should adopt and implement an optimal trade policy. The optimal trade policy suggests the sample countries be more open to trade because it may result in higher long-run economic growth.